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By Bill Vidonic

Saturday, Sept. 14, 2013, 8:24 p.m.

A new federal program will enable the Butler County Housing Authority to raise millions for badly needed upgrades to a public housing apartment building in Butler by setting up a nonprofit agency to run it.

“In Butler County, I have $12 million in capital needs right now, and I get $400,000 to deal with it,” housing authority Executive Director Perry O'Malley said about his federal allocation for major building upgrades and repairs.

The program through the Department of Housing and Urban Development enables the authority to borrow money for upgrades and renovations to Terrace Apartments by using rent and the building as collateral — something old rules didn't permit because the 160-unit dwelling is considered public housing.

The housing authority will continue to own and administer Terrace Apartments, but it will form a nonprofit arm to manage it. With a nonprofit manager, the apartment complex can be reclassified from public housing to subsidized housing. That frees the authority to use rent and the property as collateral to borrow money for renovations.

“This is a great plan for the taxpayers' benefit,” O'Malley said.

Residents of the apartment building won't notice any changes in how the building is operated and won't pay additional rent, O'Malley said.

“There are no new regulations, no disruptions, no rents will go up. Leases will stay the same,” O'Malley said, adding that the building still will be inspected annually under state and federal guidelines.

Of the 14 housing complexes the authority owns, Terrace Apartments is the first it plans to upgrade through the HUD program.

The $6.5 million in improvements include new air conditioning, windows, electrical work and carpeting, he added.

In 2011, a HUD study showed that it needed $26 billion to upgrade 1.2 million public housing units, while the federal government gave $2 billion annually for capital repairs. In November 2011, Congress authorized HUD to start the borrowing program.

HUD said that it expected, in the short term, that the program would help rehabilitate more than 13,000 public housing units, generating more than $650 million in private capital for financing the work and creating construction jobs.

In Pennsylvania, the Allentown Housing Authority is considering using the program to renovate a 34-unit building, and the Lackawanna County Housing Authority is looking at renovating a 15-unit building.

“This innovative and cost-effective approach greatly enhances our ability to confront the decline of our public housing and older assisted-housing stock,” HUD Secretary Shaun Donovan said in a statement.

O'Malley said the average rent at Terrace, which has 80 one-bedroom apartments and 80 efficiencies, is $330, which generates about $1 million annually.

The agency plans to borrow $11 million for the project, with more than $6.5 million going to construction costs.

Another $2.5 million to $3 million of existing housing authority debt will be refinanced, O'Malley said.

That debt was from HUD-backed loans that were used for work on public housing buildings throughout the authority's system.

The Terrace renovations, set to begin in the spring, are the first public housing renovations under the new HUD program in Butler County. O'Malley said.

He said the agency could shift other public housing properties to subsidized housing as a way to raise money, but because they need far fewer renovations, they would not have to be overseen by a nonprofit group.

“It would be a fair statement to say we want to see how smoothly this goes,” O'Malley said. “If it was easy, everybody would be doing it.”

Bill Vidonic is a staff writer for Trib Total Media. He can be reached at 412-380-5621 or bvidonic@tribweb.com.

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